How should businesses balance shareholder interests with obligations to their workers, communities, and nation?
The Full Conversation
It has been a pleasure discussing with Patrick how businesses should balance shareholder interests with obligations to their workers, communities, and nation. It’s good to see that we share concerns about the declines in our system of education as well as the role of family and religion in civil society even while we disagree about whether American businesses are the cause. I also want to thank Patrick for according me the honor of representing “the viewpoint of classical liberalism.” I hope I have adequately represented that viewpoint.
In that respect, my major point in our discussion, which I endeavor to make in all my writings, is that capitalism is the best engine ever developed for the creation and distribution of wealth. It has relieved untold billions of people from the worst kind of material deprivation. It is also the most intrinsically moral of all economic systems, because it requires people, as a condition of advancing their own interests, to meet the needs and desires not just of the rich or powerful, but of the common man.
I don’t believe anything Patrick has stated takes issue with that point. That’s important because it would be a severe mistake if we failed to recognize how capitalism has improved the lives of so many.
Consider the dangers of famine and deprivation that, only a short time ago, were a constant factor in the lives of most people – including my grandfather who came to the United States in the early 1900s to avoid them. We have all but banished those ills in the United States, and they are far less prevalent today in the world generally because of capitalism.
In 2013, The Economist estimated that one billion people had been removed from the ranks of extreme poverty over the previous twenty years because of American-style, free-market capitalism. The Heritage Foundation’s Index of Economic Freedom for 2020 states that the “world economy has grown during the past 25 years from about $39.2 trillion to well over $80 trillion, bringing a better standard of living to billions of people” because “economic freedom underpinned by free-market capitalism has enabled countries to grow, develop, and prosper.” In economically free societies, people “live longer. They have better health. They are able to be better stewards of the environment, and they push forward the frontiers of human achievement in science and technology through greater innovation.”
I respect Patrick and agree with him about a lot, but it is important to understand what people who learn and live in the business world know intuitively: if businesses are precluded from pursuing profit, you don’t have capitalism. If you don’t have capitalism, millions of people will suffer real deprivation.
I disagree with Patrick’s claim that I have “a hidden premise” that “the health of educational, family, and religious institutions can flourish separate from any corporate activities.” To the contrary, I believe that the health of these institutions is inherently tied to “corporate activities” and dependent on a thriving business community – as is the wellbeing of the common men and women who throughout history, until the advent of capitalism, lived in abject poverty and despair regardless of the relative strength of these other institutions.
Nor do I believe, as Patrick claims, that “if corporations are simply allowed solely to pursue profit as their exclusive undertaking” then “the wealth and prosperity generated should translate into a vibrant and healthy civil society.” Rather, I believe that a vibrant and healthy civil society requires far more than wealth.
That was my point in asking Patrick the extent to which his “concerns about corporations” were “really an expression of concern about other parts of society.” Increasing profits alone will not create a vibrant and healthy society. That requires strong educational, family, and religious institutions. However – and this is critical – it is far easier for a society experiencing prosperity and abundance to be vibrant and healthy than it is for one experiencing poverty and want.
Capitalism’s job is to create that prosperity and abundance, not to transform our morality. In fact, economic systems do not transform individual morality. Marxism and socialism attempted to do so and unequivocally failed. Capitalism comes the closest to improving our morality by focusing people on the needs of others. But, when you diminish the profit motive in an attempt to transform capitalism into a tool for moral or social change, you diminish its ability to produce the prosperity and abundance that serve as the basis for a vibrant and healthy society where people can thrive.
There may be instances where that is the right thing to do. As I’ve stated, I am not opposed to reasonable regulation when the government determines that something is more important than economic growth. But I insist that everyone recognizes the tradeoff because, especially in government and among thinkers on the Left, the tendency is to assume that there is no human cost to burdening the freedom of businesses to invest, profit, and grow. In reality, there are significant costs, to real people with real and legitimate aspirations, as I had 50 years ago. If sometimes I seem like a “Johnny one note” in saying so, it’s because so few people in the public square today are willing to stand up without apology or qualification for the virtues and benefits of our capitalist economy.
I believe that Patrick and I have come closer together in this exchange, and I regret that it is coming to an end. We both agree that the real problem in our society is the decline of cultural institutions and the moral values that underpin them. The difference between us is that Patrick believes the ethos of capitalism is a primary cause of that decline.
I find that hard to accept. After all, the United States pretty much had unrestrained capitalism until a hundred years ago. Certainly abortion, illegitimacy, pornography, and single-parent households were less common then than they are today. Religious faith was far more common, the notion of community was stronger, and there was less of a sense of rootlessness and isolation than we now experience.
Patrick is right that in the last 50 years, as our country has become more prosperous, it has become less cohesive and more dysfunctional. But if we’re going to equate correlation with causation, what else happened during that time that might be responsible for these social ills? How about the massive growth in the size, scope, and influence of government?
Is it possible that the growth of government programs and policies that discourage marriage, punish work, upend traditional values in the schools, and reward dysfunctional behavior might be responsible for the decline in civil society that Patrick and I both recognize?
Capitalism is doing its job, creating incredible prosperity and establishing the base upon which we can build a vibrant and healthy society. The profit motive is driving that success and is not the source of the problems we face as a society. Diminishing it is also not the solution.